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You can find the current article at its original source at https://www.theguardian.com/commentisfree/2018/sep/19/hoarding-business-brexit-britain-stockpiling-car
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| Hoarding makes sense for businesses – but it will add to Brexit Britain's woes | Hoarding makes sense for businesses – but it will add to Brexit Britain's woes |
| (8 days later) | |
| A lettuce is a useless candidate for stockpiling ahead of a possible no-deal Brexit. A tin of soup is better. What else could be on the list of things to hoard is a question every household and business manager will ask themselves in the next few months. | A lettuce is a useless candidate for stockpiling ahead of a possible no-deal Brexit. A tin of soup is better. What else could be on the list of things to hoard is a question every household and business manager will ask themselves in the next few months. |
| The government has shown the way with plans to order enough medicines to see the NHS through the worst that Brexit has to offer. | The government has shown the way with plans to order enough medicines to see the NHS through the worst that Brexit has to offer. |
| Is this yet another anti-Brexit salvo from the team that brought you project fear? Not really | Is this yet another anti-Brexit salvo from the team that brought you project fear? Not really |
| Mondelēz, the owner of Cadbury, says it is hoarding cocoa beans and other ingredients of chocolate now that a messy, acrimonious divorce with the European Union next March is more than an outside possibility. | Mondelēz, the owner of Cadbury, says it is hoarding cocoa beans and other ingredients of chocolate now that a messy, acrimonious divorce with the European Union next March is more than an outside possibility. |
| This week, BMW said it was bringing forward the 2019 summer shutdown of its Cowley Mini plant to next March as a defensive move. Manufacturers across the land are storing up parts just in case gridlock in parliament leads to similar gridlock in Britain’s ports, and basic goods cannot make their way through customs. | This week, BMW said it was bringing forward the 2019 summer shutdown of its Cowley Mini plant to next March as a defensive move. Manufacturers across the land are storing up parts just in case gridlock in parliament leads to similar gridlock in Britain’s ports, and basic goods cannot make their way through customs. |
| BMW will do so, along with every other car manufacturer in the country, to make sure their minute-by-minute demand for specialist parts is secure. For them, Brexit is worse than a administrative headache – though that is bad enough: Brexit eats into their entire business game plan. | BMW will do so, along with every other car manufacturer in the country, to make sure their minute-by-minute demand for specialist parts is secure. For them, Brexit is worse than a administrative headache – though that is bad enough: Brexit eats into their entire business game plan. |
| As the car makers’ trade body, the Society of Motor Manufacturers and Traders, says in a report on Wednesday, Britain crashing out of the single market and customs union would add £5bn in annual tariffs to the price of the 2.7m cars and vans that cross the Channel each year. This bill stems from the huge number of parts that go from one factory to another, to and fro, before the finished article appears on a garage forecourt. | As the car makers’ trade body, the Society of Motor Manufacturers and Traders, says in a report on Wednesday, Britain crashing out of the single market and customs union would add £5bn in annual tariffs to the price of the 2.7m cars and vans that cross the Channel each year. This bill stems from the huge number of parts that go from one factory to another, to and fro, before the finished article appears on a garage forecourt. |
| The chemicals industry, the plastics sector and any firm using metals will be similarly affected. It is a long time since the UK smelted its own aluminium. Likewise, much of the high-grade steel used in Britain is imported from abroad. | The chemicals industry, the plastics sector and any firm using metals will be similarly affected. It is a long time since the UK smelted its own aluminium. Likewise, much of the high-grade steel used in Britain is imported from abroad. |
| Some commentators doubt the EU would ever allow a complete breakdown in trade, or even sanction a scheme that hindered it in any way. Yet it makes sense to hoard raw materials just in case ports have a 19th-century look to them – with crowds of ships filling the harbour, queuing for a berth. | Some commentators doubt the EU would ever allow a complete breakdown in trade, or even sanction a scheme that hindered it in any way. Yet it makes sense to hoard raw materials just in case ports have a 19th-century look to them – with crowds of ships filling the harbour, queuing for a berth. |
| A report by the economic consultancy the CEBR estimates that hoarding will be so widespread that it will boost economic growth over the next six months. The extent of this expansion will be sufficient to offset the lack of investment and trade that most forecasters have assumed will virtually kill off GDP growth between now and next March. | A report by the economic consultancy the CEBR estimates that hoarding will be so widespread that it will boost economic growth over the next six months. The extent of this expansion will be sufficient to offset the lack of investment and trade that most forecasters have assumed will virtually kill off GDP growth between now and next March. |
| The theory behind the CEBR report is that companies have a reason to stockpile – and virtually no cost of doing it while interest rates remain near zero. There is little history to go on because it’s unusual to have an economic event looming that can be quantified in its effects from mild to disastrous. Usually economic events come as a surprise and companies, faced with a collapse in consumer demand and nervous banks that refuse credit, react by running down their stockpiles. | The theory behind the CEBR report is that companies have a reason to stockpile – and virtually no cost of doing it while interest rates remain near zero. There is little history to go on because it’s unusual to have an economic event looming that can be quantified in its effects from mild to disastrous. Usually economic events come as a surprise and companies, faced with a collapse in consumer demand and nervous banks that refuse credit, react by running down their stockpiles. |
| The CEBR chairman and economist, Douglas McWilliams, accepts that his report is based on “anecdotal evidence, surveys and intuition” but still believes GDP will be 0.5% on average above the underlying trend over the three quarters from July 2018 to March 2019. | The CEBR chairman and economist, Douglas McWilliams, accepts that his report is based on “anecdotal evidence, surveys and intuition” but still believes GDP will be 0.5% on average above the underlying trend over the three quarters from July 2018 to March 2019. |
| There is a cost to bringing forward billions of pounds worth of purchases, and that will be a reduction in GDP by the equivalent amount during the rest of 2019. | There is a cost to bringing forward billions of pounds worth of purchases, and that will be a reduction in GDP by the equivalent amount during the rest of 2019. |
| “This makes a post-Brexit mini recession almost inevitable,” he says. | “This makes a post-Brexit mini recession almost inevitable,” he says. |
| Is this yet another anti-Brexit salvo from the team that brought you project fear? Not really. McWilliams is an independent economist and is merely adding and then subtracting the same amount of economic activity. Rather than a long, slow grind through the next 18 months, he is predicting more of a roller-coaster. | Is this yet another anti-Brexit salvo from the team that brought you project fear? Not really. McWilliams is an independent economist and is merely adding and then subtracting the same amount of economic activity. Rather than a long, slow grind through the next 18 months, he is predicting more of a roller-coaster. |
| And it depends on how spooked businesses become by the threat of a no-deal Brexit. The car companies say it is already too late to avoid making plans to protect themselves from the worst. Others might source more parts and materials from domestic suppliers – but an economy that generates almost a third of its GDP from trade cannot make that switch overnight. | And it depends on how spooked businesses become by the threat of a no-deal Brexit. The car companies say it is already too late to avoid making plans to protect themselves from the worst. Others might source more parts and materials from domestic suppliers – but an economy that generates almost a third of its GDP from trade cannot make that switch overnight. |
| • Phillip Inman is economics editor of the Observer | • Phillip Inman is economics editor of the Observer |
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